Boeing Faces New Upheaval After Crash Of Chinese Airliner
No fault has been found, but the company, which has been trying to overcome a recent legacy of design and production troubles, is likely to get scrutinized.
The crash of a Boeing jet in China on Monday is the latest crisis for the American plane manufacturer, raising the prospect of renewed regulatory scrutiny and confronting the company with another catastrophe involving its planes.
It could be weeks or even months before investigators identify what caused the Boeing 737-800 NG operated by China Eastern Airlines to plunge from the sky with more than 130 people aboard. But the outcome of the investigation could weigh heavily on Boeing, which recently overcame years of troubles involving a newer variant of the single-aisle 737, the Max, and has had long delays in producing and delivering the twin-aisle 787 Dreamliner.
“I think it’s going to be very important to see what actually happened with this particular incident because there’s a credibility concern,” said Rob Spingarn, a managing director at Melius Research, a financial analysis firm. “I think the investment community will pause to some extent on Boeing until that information is out.”
Thousands of 737-800 NG planes have safely traversed the globe in recent decades, and many industry analysts and experts were disinclined to conclude that Monday’s crash indicated any fundamental design flaw. But Boeing’s stock fell 3.6 percent nonetheless. Shares of China Eastern ended 6.5 percent lower in trading in Hong Kong.
An icon of the aviation age, Boeing is the largest manufacturing exporter in the United States, a blue chip stock and a major employer. It is also one of the federal government’s biggest contractors.
Last year was its best for sales since 2018, with net orders of 535 planes. But it has endured repeated setbacks, including a $3.5 billion charge in the final three months of 2021 from the Dreamliner delays, driving the company to a $4.2 billion loss for the quarter.
In addition to its difficulties with the Max and the Dreamliner, two flagship planes, Boeing has had to contend with an industry slowdown resulting from the coronavirus pandemic. With air travel recovering only slowly to 2019 levels, airlines have cut back plans to buy new planes.
Boeing’s recent problems began with the Max, which was widely criticized after one of the planes crashed in Indonesia in late 2018 and a second crashed in Ethiopia in March 2019. All 346 people aboard the planes were killed, and the Max was grounded worldwide after the second crash.
Those disasters brought regulatory rebukes, several lawsuits, and billions of dollars in fines, settlements and lost orders. The United States approved the Max for flight again in late 2020, requiring Boeing to make certain changes to the plane. That prompted similar approval from other countries, but regulators in China granted approval only in early December.
Industry analysts had expected the plane to resume flying there in the coming months. But its return could become intertwined with the investigation into the crash involving the 737-800 NG, analysts said, with Chinese government officials hesitant to bring back the Max as they investigate a crash involving its predecessor.
The Max crashes were directly tied to flight-control software known as MCAS, which the Max is the only commercial airliner to use. That system was introduced to the Max to account for changes made when the plane was upgraded from the NG, or Next Generation, line.
On Monday, Boeing said that it was in touch with China Eastern Airlines and with the National Transportation Safety Board, the agency leading U.S. efforts in assisting China’s investigation into the crash.
The safety board said that it had appointed a senior investigator as the representative to the investigation and that Boeing, the manufacturer of the plane’s engines and the Federal Aviation Administration would contribute technical expertise. Boeing also said that its technical experts were “prepared to assist” China’s aviation authority, the Civil Aviation Administration of China.
The Boeing 737-800 NG is a workhorse of the skies. Boeing delivered nearly 5,000 of the planes between 1998 and 2020, far more than any of the other commercial planes it sells, according to Boeing data. Along with the Max, it holds special appeal for airlines because of its passenger capacity and travel range. Single-aisle planes are typically used for domestic flights, though some airlines use them for shorter international trips.
For Boeing and its 737 family, China is an important market. Of the 25,000 passenger planes in service worldwide, about 17 percent are Boeing 737-800 NGs, according to Cirium, an aviation data firm. China is home to nearly 1,200, followed by Europe, with nearly 1,000, and the United States, with nearly 800. In the United States, American Airlines has 265 in service, while Southwest Airlines has 205, United Airlines has 136 and Delta Air Lines has 77, according to Cirium.
China is also the second-largest market for Boeing planes, after the United States. Last year, the company forecast that the number of commercial planes in China would double by 2040, with airlines there needing 8,700 new aircraft by then, valued at about $1.47 trillion.
The country is perhaps even more crucial for Boeing’s leading rival, Airbus. Last year, Airbus delivered 142 commercial aircraft to China, its largest single-country market, representing a quarter of its production.
Airbus has a mammoth assembly line in Tianjin, China, producing A320 single-aisle planes and A330 wide-body passenger jets. It also has relationships with Chinese airlines and helicopter operators, and many components in Airbus jets are made by Chinese companies. The value of industrial cooperation between Airbus and China was $900 million in 2018, up from $500 million in 2015, according to Airbus.
But as important as China is, Boeing’s relationship with the country can be complicated. When tensions rise between China and the United States — as they did during former President Donald J. Trump’s trade war — Boeing can find itself at a disadvantage.
“As someone once said, they’ve always been the designated hostage in any kind of U.S.-China geopolitical standoff,” said Richard Aboulafia, a managing director at AeroDynamic Advisory, an aviation consulting firm.
In addition, as China’s economy cools, so, too, could its expanding travel sector, testing Boeing’s reliance on the country.
And then there is the Comac C919, China’s homegrown competitor to the 737. The plane is set to debut this year and poses a long-term threat to Boeing and Airbus in China. But analysts widely expect it could be years before China refines the plane, begins large-scale production and supports its domestic growth with readily available parts and maintenance.
“All of these things take time to develop,” said Mr. Spingarn of Melius Research. “That’s why you don’t have more aircraft manufacturers.”
Liz Alderman and Keith Bradsher contributed reporting.